THE MARKET SLOWS DOWN, BUT REMAINS FIRM

After a 2022 record-breaking performance, and reflecting the global trend, real estate investment in the Spanish market cooled down in 2023. Nevertheless, the volume invested remains robust and in line with the historic average, totaling €6.7 billion until the end of September.

This data was calculated by Iberian Property Data, based on the analysis of a sample of 194 investment operations carried out in Spain between January and September 2023, amounting to a total of €6.69 billion. This figure represents a y-o-y drop of -45% compared with €12.2 billion traded in 2022, which we recall brought a growth of 48% compared with 2021. The slowdown of the Spanish market is also evident in the lower number of operations completed, with Iberian Property Data identifying 255 deals between January and September 2022, 61 more than in the same period this year.

A closer look at how capital markets evolved throughout the year shows an evident trend of decelerating investment, with the volumes invested decreasing from quarter to quarter. After almost €2.5 billion were traded in Spain in the first quarter, between April and June, the investment volume dropped 3% in quarterly terms, to €2.42 billion. This downward trajectory gained momentum in the transition to the third quarter, when investment went no further than €1.81 million, a quarterly decline of -25%.

Using the semester as a reference, the trend is somewhat different. After capital markets dropped 31% in the second half of 2022 (€5.55 billion) compared with the previous semester (€8.08 billion), in the first half of 2023 (€4.88 billion) the semesterly decline was less pronounced, going no further than 12%. However, in a y-o-y comparison, the investment reported between January and June 2023 fell 40% compared with the first half of 2022.

Although Madrid, the capital, and Barcelona, the second largest city in the country, continue to stand out as the principal focal points of capital, with these two cities concentrating 46% of the total amount allocated to Spain, it must be noted that investors are keeping an eye on opportunities opening up in secondary cities, as the Iberian Property analysis shows.

In the first nine months of 2023, Madrid featured 65 investment operations altogether worth €1.86 billion, the equivalent of 28% of the national total. This figure represents a y-o-y decline from the €2.83 billion and 96 deals reported in the region the previous year, with these indicators dropping -34% and -32%, respectively.

In turn, Catalonia, led by Barcelona, concentrated 18% of the total investment in Spain during the period under analysis, in other words, €1.17 billion distributed across 41 operations. This performance was 53% below the amount invested one year before (€2.47 billion), when 50 deals were undertaken.

Looking at each of the remaining regions, we note the Valencia region, which concentrated 8% of the investment in Spain in the first nine months of 2023, with €567 million and 22 deals. This figure represents a y-o-y growth of 89%, with this region trading only €350 million in 2022, the equivalent of just 3% of the national total.

Next come the Balearic Islands, with 7% of the national investment until the end of the third quarter of 2023, in a total of €492 million in 8 deals, in other words, 16% higher than the €425 million recorded one year before, when this region’s share was just 3%. The Basque Country and Andalucia presented the opposite trend. In the first case, the volume of investment fell 66%, from €409 million in 2022 currently to €139 million and 10 deals, bringing a share of just 2% of the national investment (vs 3% in 2022). In Andalusia, the decline was even greater, with the amount traded decreasing almost 71%, from €458 million in the first nine months of 2022 to just €135 million during the same period this year, with this region’s share dropping 4%, currently to 2%.

Regarding the target of investment per sector, in the first nine months of 2023 there is an evident preference from capital in accommodation formats, whether for housing or tourism. Thus, one quarter before the end of the year, Multifamily stands out as the preferred asset class among investors in 2023, attracting €2.01 billion, in other words, 30% of the total. Directly behind, Hotels attracted 29% of the investment in this period: €1.94 billion. The podium is completed by Offices, with €984 million and a share of 15%. Looking back at the first nine months of 2022, it is interesting to note that the podium featured the exact same assetclasses, but in a different order, with Offices leading the ranking with a 33% share (€4.03 billion), followed by Multifamily in second place with 22% (€2.63 billion), and then Hotels with 17% (€2.04 billion).

Logistics appear in fourth position, reporting €685 million invested and a share of 10%, followed by Retail with €562 million and Alternative as- sets with €506 million, both with a 10% share each. In 2022, the fourth position was occupied by Retail, with a share of 14% (€1.65 billion), while Logistics came in fifth place, with 12% and €1.5 billion. Alternatives close the ranking with a share of just 3% (€332 billion).